SOLUTIONS TO PROBLEMS
P20-1
1. 2010 2011
Service cost $211,000 $217,000
2. 2010
Dec. 31 Pension Expense 230,000
Cash 220,000
Accrued/Prepaid Pension Cost 10,000
31 Accrued/Prepaid Pension Cost 7,000
P20-2
1. 2010 2011
Service cost $340,000 $348,000
Interest cost on projected benefit obligation 218,000a 273,800c
2. 2010
Jan. 01 Other Comprehensive Income:
Prior Service Cost 2,180,000
Accrued/Prepaid Pension Cost 2,180,000
3.
Accrued/Prepaid Pension Cost
2,180,000(Beg 10)
136,250(10)
24,250 (10)
20-23
P20-3
2010 2011
Pension Pension
Item Amount Expense Amount Expense
Beginning projected benefit
obligation $ 980,000a $1,245,400
Beginning plan assets $ 0 $ 342,000
+ Actual returnc 0 30,780
+ Contributions 342,000 336,000
– Benefits paid (0) (0)
= Ending plan assets $ 342,000 $ 708,780
Prior service cost $ 980,000 $ 980,000
20-24
P20-4
1. 2010 2011
Service cost $463,000 $475,000
Interest cost on projected benefit obligation 111,600a 163,314c
Expected return on plan assets -0- (62,100)d
2. 2010
Jan. 01 Other Comprehensive Income:
Prior Service Cost 1,240,000
Accrued/Prepaid Pension Cost 1,240,000
3.
Accrued/Prepaid Pension Cost
1,240,000(Beg 10)
19,400(10)
8,214 (11)
20-25
P20-4 (continued)
3. (continued)
4. Beginning projected benefit obligation $1,240,000
P20-5
2010 2011
Pension Pension
Item Amount Expense Amount Expense
Beginning projected benefit
obligation $1,860,000a $2,235,800
Beginning plan assets $ 0 $ 520,000
+ Actual returnc 0 52,000
+ Contributions 550,000 530,000
– Benefits paid (30,000) (30,000)
= Ending plan assets $ 520,000 $1,072,000
Prior service cost $1,860,000 $1,860,000
P20-5 (continued)
P20-6
Expected Years of
Number of Service Years
Rendered in Each Year
1(a). Employee Future Service 2010
2011 2012 2013 2014 2015
A
B
1
3
1
1
1
1
1(b).
Year
Total
Prior Service
Cost
Amortization
Fraction
Amortization
to Increase
Pension Expensea
Remaining
Prior Service
Costb
2010
$1,200,000
6/24
$300,000a
$900,000
2. 2010
Jan. 01 Other Comprehensive Income:
Prior Service Cost 1,200,000
P20-6 (continued)
2. (continued)
2011
Dec. 31 Pension Expense 831,930a
Accrued/Prepaid Pension Cost 1,930
20-28
Projected Fair Value
Cumulative Benefit of Plan Excess Amortized Net
Year Net Loss (Gain)a Obligationa Assetsa Corridorb Net Loss (Gain)c Loss (Gain)d
2010 $25,000 $220,000 $200,000 $22,000 $3,000 $150e
aAt beginning of the year
b10% of the greater of the projected benefit obligation or the fair value of the plan assets at the
beginning of the year
P20-7
20-29
P20-8
1. 2010
Jan. 01 Other Comprehensive Income:
Prior Service Cost 80,000
Accrued/Prepaid Pension Cost 80,000
2. In Liabilities:
Accrued pension cost $124,000
In Stockholders’ Equity:
Accumulated Other Comprehensive Income:
3. 2011
Dec. 31 Pension Expense 152,900
Cash 142,000
Accrued/Prepaid Pension Cost 10,900
20-30
P20-8 (continued)
4. In Liabilities:
Accrued pension cost $126,900
P20-9
Note to Instructor: The identifying letter of each item to be calculated is shown in
parentheses to the left of each answer in the following schedules and footnotes.
An alphabetical listing of the answers is shown at the end of the solution.
2010 2011
Service cost $100,000 (j)$109,000
Interest cost on projected benefit obligation 54,0001 64,8006
20-31
Alphabetical Listing of Answers
(a)
$600,000
(g)
$64,800
P20-10
Employee Expected Years of Service Years
1. Numbers
Future Service Rendered
1-5 2 10
550
ofNumber
yearsService
remainingAverage ÷=
a$88,000 ÷ 11 (average remaining service life)
2.
Year
Cumulative
Net Loss
Corridor
Excess
Net Loss
Amortized Net
Loss (Gain)